The Coalition Against Insurance Fraud reports that in the US alone, $80 billion is lost to insurance fraud each year. There have been numerous pieces of legislation created to crackdown on insurance fraud. Insurance fraud has been classified as a crime in the US, with almost every state establishing its own fraud bureau. In Canada, the Insurance Crime Prevention Bureau was created to gather information and carry out investigations regarding insurance fraud. In the UK, fraud has been labeled as a crime under the Fraud Act established in 2006.
With a rise in insurance fraud incidents and stricter legislation, insurance fraud investigators need all the help they can get to ensure each investigation is managed properly.
The National Insurance Crime Bureau (NICB) reports a significant increase in the number of questionable claims received throughout 2009. As the effects of the recession continue to linger, people become desperate, causing them to take advantage of the insurance system. The NICB refers to this type of insurance fraud as “opportunistic fraud.” Here are some examples of “opportunistic fraud” claims received by NICB member companies as listed on their website:
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- “Hail Damage- Increasing 407 % between 2008 and 2009, hail damage is an example of opportunistic home insurance fraud. For example, a hail storm causes damage to a few shingles on a house, but the owner views this as an opportunity and claims an entirely new roof out of the insurance company.
- Suspicious vehicle fires/arsons and abandonment- Suspicious fire claims increased 27% between 2008 and 2009, while owner abandonment increased 24%. An example of this type of opportunistic fraud is a car owner having trouble making payments on their vehicle decides to torch the car (suspicious fire/arson) or drives it to a remote area and abandons it. The car is then reported vandalized or stolen.
- Slip-and-Fall Accidents-Suspected fraudulent claims related to workers’ compensation insurance were up 71%.”
Investigating Insurance Fraud
Investigations involving insurance fraud require effective case management tools and task reminders to ensure each investigation is completed in a thorough manner. Managing large volumes of insurance fraud investigations can be extremely difficult if the correct case management tools are not in place. The West Virginia Insurance Commission uses i-Sight Investigation Software to manage their insurance fraud investigation case loads. In 2004, in an effort to reduce the number of cases of insurance fraud in West Virginia, the state legislature passed House Bill 4004. This change lead to the creation of the Fraud Division of the West Virginia Insurance Commission. This division investigates all forms of consumer and commercial insurance fraud– automotive, property and casualty, life, fire and disability coverage, while also maintaining responsibility for investigating suspected cases of fraud in West Virginia’s workers’ compensation system.
Previously, if there was sufficient evidence available, suspected cases of insurance fraud in West Virginia were usually handed over to state or local police for investigation. The task of logging and managing all of the cases “was basically done with a paper filing system and human memory,” stated Gary Griffith, head of the Fraud Division of the West Virginia Insurance Commission. Griffith knew his department needed a more effective way to manage the increasing number of insurance fraud investigations they were receiving.
Accuracy is an important consideration when selecting a case management system. Griffith stated, “in the past, the lead investigator or somebody else would have had to sit down and manually go through all of the information in a file in order to write up a summary. It was very, very time-consuming, which meant people often got frustrated and took shortcuts. With i-Sight, you just press a button and the system spits out a complete written report. It saves a lot of man-hours, eliminates duplication of effort and the final result is more accurate. ” He had also learned that the i-Sight system was fully customizable, making it easier to deploy a system configured to meet the Fraud Unit’s exact requirements.
At Griffith’s request, i-Sight was configured to send him automatic alerts based on specified triggers, such as when there has been no activity on a case for 30 days. “That’s important because it means I can take a look at the case and make sure there are no problems getting in the way of our investigative work. It gives me greater supervisory capability. I can see the whole case at once, instead of just bits and pieces.” Any type of investigation needs to be completed in a timely manner. Time is a critical factor in the success of an investigation, therefore, alerts are great tools for drawing attention to a particular case.
Using i-Sight’s built-in reporting capabilities, Griffith and his team can also analyze the Fraud Unit’s caseload to detect patterns of insurance abuse and plan their strategies accordingly. Over time, he says, that should allow them to become much more proactive in dealing with fraudulent behaviour. The ability to identify trends, whether it be by insurance fraud type or by region, provides valuable insight to an investigative unit. This information helps detect and deter fraud, helping generate awareness of scams or rings of individuals involved in committing fraudulent crimes.